“It’s going to be a pretty tricky year,” says Tim Stevenson, 49, manager of the Henderson Euro Trust. “Everywhere you look, there’s a lot more bad news to come, in terms of car sales, factory output, GDP and desperate attempts by governments” to save the financial system. The current rally won’t last long, he says. “I wouldn’t be surprised if we get back down to October’s lows.”
Even so, he’s cut the fund’s cash position from 8% three months ago to about 3% today, in anticipation of a recovery towards the end of the year and into 2010. He has already begun adding to positions and taking stakes in new ones.
Current favourites include CRH, the Irish building materials firm, because of its global exposure and “especially because of its position in the US” and the potential benefits of any Obama-fuelled infrastructure boom. He also likes Swedish engineer Sandvik as it’s cash generative with a strong balance sheet. “It’s going to be tough for these guys. But the company is well diversified”, making everything from tools for miners to cables for drilling oil wells. “It is a company that will come through the recession.”
Stevenson “doesn’t care about geographical locations or sectors”, but focuses on stocks that provide reliable, steady growth. He reckons these “will be more difficult to find” in the coming year. Ranked second over three years of 12 Europe-focused investment trusts tracked by Morningstar, the fund trades on a discount of 11.3% to net asset value and is down 2.6% over one year against a 31% drop for the FTSE World.
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Henderson Euro Trust top ten holdings
| Name of holding | % of assets |
|---|---|
| Fresenius Medical Care AG & Co.KGAA | 4.4 |
| Fresenius AG | 4.3 |
| Synthes Inc | 4.2 |
| Vivendi | 4.2 |
| Deutsche Post AG | 3.6 |
| Roche Holding AG | 3.6 |
| Munchener Ruckversicherungs AG | 3.1 |
| Linde AG | 3.0 |
| Beiersdorf AG | 2.9 |
| Essilor International | 2.9 |